Homeowners stay unemployed for longer

A new AHURI study has found that people who own or are paying off their home move less often than people who are renting privately, and this reduced mobility reduces their ability to respond to adverse labour market shocks (such as being made redundant) and may lead to higher rates of unemployment.

The study, ‘Housing tenure, mobility, and labour market behaviour’, completed for AHURI by researchers from the University of Sydney and Swinburne University of Technology, examined the relationships between housing and labour market behaviours, including geographic mobility, the minimum wage that an unemployed individual finds acceptable and job search behaviour.

... analysis shows that home owners, both buyers and outright owners, have rates of geographic mobility approximately 15 percentage points lower than private renters.

The report’s lead author, Associate Professor Stephen Whelan from the University of Sydney, says ‘Our analysis shows that home owners, both buyers and outright owners, have rates of geographic mobility approximately 15 percentage points lower than private renters. This is due in part to the impacts of high selling costs and stamp duties when selling a house and this can have an impact on their employment decisions.’

Indeed the research found that home-owners with loan-to-value ratios greater than 80 percent (that is, they owed more than 80 percent of their property’s value to a financial institution) are 2 per cent more likely to change jobs without changing residential location compared to those in private rental accommodation.

The study also found that while public housing provides security of tenure and other benefits, it can ‘trap’ householders in unemployment as they can’t move as readily (e.g. as they might lose their secure housing if there is no dwelling available in the area where there are jobs) as householders in the private rental market.

‘We also found that unemployed people who were still paying off their house but had a lot of equity in their property were 9 percent more likely to find adequate employment than comparable individuals who own their home outright,’ says Whelan. ‘This group also have higher reservation wages than outright owners, that is the payment rate they are prepared to accept for a job is approximately 6 per cent higher than the rate an outright owner will accept. In general, reservation wages increase with housing costs, with the lowest reservation wages levels for people in social housing and then for those in private rental tenures.’

The study also found that while public housing provides security of tenure and other benefits, it can ‘trap’ householders in unemployment as they can’t move as readily (e.g. as they might lose their secure housing if there is no dwelling available in the area where there are jobs) as householders in the private rental market. In addition, although Commonwealth Rent Assistance enhances flexibility for lower income private renters by ensuring that their housing assistance is not location specific, renters may face considerable barriers when competing in the private rental sector that subsidies alone cannot overcome (such as shorter leases and insecure tenure).

The researchers suggest housing policy that provides secure and long-term affordable housing options has a role to play in ensuring the prevention of homelessness and its long-term costs to individuals and society.